Silver prices have experienced a dramatic reversal, plunging nearly ₹2 lakh from their January highs and erasing all 2026 gains. According to The Economic Times, May silver futures have plunged 46% from their record high of ₹4.39 lakh per kilogram to below the ₹2.40 lakh mark in just three months. In absolute terms, this represents a sharp erosion of ₹2,00,554, highlighting the intensity of the selloff. The white metal is now trading below its 2025 closing level at ₹2.38 lakh, down from ₹2.41 lakh, marking a complete reversal from its previous strong performance. Market participants indicated that both long-term and short-term investors were caught off guard, leading to a rush to cut risk and move towards safer positions amid rising volatility.
Three primary factors are driving the sharp correction in silver prices. As reported by The Economic Times, the West Asia crisis has created a risk-off sentiment that has pushed investors to raise cash and trim leveraged positions across asset classes. A stronger U.S. dollar and hawkish Federal Reserve have reduced the appeal of non-yielding assets like silver, as a stronger U.S. currency makes the metal more expensive for holders of other currencies. Additionally, profit-booking after an overstretched rally has accelerated the downside move, with traders preferring to lock in gains rather than continue chasing the rally during periods of increased volatility. Rising geopolitical tensions in West Asia and a sharp spike in crude oil prices have triggered broader risk-off sentiment across financial markets, with silver witnessing selling pressure as investors liquidated positions to meet margin calls and rebalance portfolios.
Despite the recent correction, silver's structural fundamentals remain strong. According to The Economic Times, strong and rising industrial demand accounts for more than 60% of total silver consumption, with growing usage across multiple sectors along with steady investment demand from China. Tata Mutual Fund emphasizes that corrections after sharp and extended rallies are natural and do not weaken the long-term bullish outlook for precious metals. The report notes that any decline in prices due to dollar rally or easing tensions provides an opportunity to accumulate or invest in silver. Experts also highlighted that recent price action reflects shifting capital flows rather than a collapse in safe-haven demand, with precious metals coming under pressure driven by crude oil competing for the same pool of inflation-hedge capital.
The market faces a persistent supply deficit that continues to support silver prices. As reported by The Economic Times, silver has been in a supply deficit for five consecutive years and has now entered its sixth year of structural shortfall. Export restrictions and declining inventories on the Shanghai Futures Exchange, which are currently near decade lows, highlight the strain on physical availability. This persistent imbalance between demand and supply remains a significant positive for market sentiment and continues to support a constructive long-term outlook for silver prices. Technical indicators also point to continued near-term pressure, with silver on the verge of breaking below $73 (~ ₹235,000), and if prices sustain below this level, the next target is $70 (~ ₹225,000).
From a technical perspective, MCX Silver is currently trading near the ₹2,45,200 zone after breaking above the key ₹2,44,400 resistance. According to The Economic Times, immediate resistance is placed at ₹2,46,000, and a sustained move above this level could trigger fresh buying toward the ₹2,47,000-₹2,48,000 range. Ponmudi R from Enrich Money advises investors to avoid aggressive fresh buying and instead adopt a staggered accumulation strategy near strong support zones with a medium- to long-term investment horizon. Analysts expect volatility to remain elevated, with global interest rate decisions and geopolitical developments likely to play a key role in determining the next direction for silver prices. The combination of a strong US dollar, ongoing geopolitical tensions surrounding US-Iran relations, and rising crude oil prices could keep both gold and silver under pressure in the near term.
